Riyad Capital expects SAR 351 mln Q1 profit for Almarai

Almarai Co. is expected to see a SAR 351 million net profit in Q1 2017, up 14 percent year-on-year (YoY), Riyad Capital said in an earnings forecast.

“Although we expect topline to rise 6.3 percent YoY to SAR 3.7 billion, this compares unfavorably to a 13.6 percent YoY growth in Q-2016,” the equity research firm said.

Almarai’s poultry segment is expected to continue to suffer in Q1, while the dairy segment will be boosted by the launch of the powered milk production line, along with an increase in exports.  

The bakery segment will likely see the strongest boost as the company launches the new factory in Hail, adds more bakery products and expands the distribution network.

Gross margins are likely to improve to 35.8 percent in Q1 compared to 35.5 percent last year, due to lower input costs and improved operational efficiencies.

Gross profit is expected to post a 7 percent increase YoY to SAR 1.3 billion.

Meanwhile, despite a capital investment of SAR 4.5 billion, the SAR 0.90 dividend per share “for 2016 was largely viewed positively by investors. Stock price has reacted well, rising 4 percent year-to-date,” the note said.

Riyad Capital affirmed a “Neutral” rating on the stock with a target price of SAR 61 per share. However, as the stock trades “above our SAR 61 target and at a 2017E P/E of 20.8x, we do not recommend any fresh exposures at this point,” it added.